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$2.45b foreign takeover of mining multinational

An Asia-backed buyer is taking over the Australian part of multinational resource company for a whopping $2.45 billion, raising speculation the mining industry will soon see better days.

China-headquartered Yancoal Australia is acquiring Rio Tinto’s subsidiary Coal & Allied Industries, which owns a 67.6 per cent interest in the Hunter Valley Operations Mine, 80 per cent interest in the Mount Thorley Mine, 55.6 per cent interest in the Warkworth Mine and 36.5 per cent interest in Port Waratah Coal Services, among others.

The takeover deal comprises of an initial $1.95bn cash payment and $500 million in aggregate deferred cash payments, which will be paid in instalments of $100 million annually for five years. Rio will potentially also be entitled to royalties once the sale is complete.

Rio welcomed the agreement, saying it reflects the company strategy of reshaping its portfolio to ensure the “most effective use of capital”.

“We are confident that Coal & Allied will continue to contribute to the New South Wales economy and the communities of the Hunter Valley under a new owner,” Rio Tinto chief executive Jean Sebastien Jacques says.

“Our world-class assets, strong balance sheet and relentless focus on cash will ensure that we deliver superior returns for our shareholders.”

For now, Rio will continue to receive earnings and cashflow generated by Coal & Allied until the transaction ends. The operations will continue to use Rio Tinto marine freight services, following completion of the transaction.

The transaction is subject to approvals from the Australian Government, Chinese regulatory agencies and the NSW Government.

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